Gold & Silver Digest: 2/26/13

Adam Taggart
By Adam Taggart on Tue, Feb 26, 2013 - 5:47pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

2/26/13 5:16 PM EST US close metals price quotes from Finviz

Reuters: Gold gains most in 3 months as Bernanke defends policy

NEW YORK, Feb 26 (Reuters) - Gold rose 1.3 percent on Tuesday, its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke's defense of U.S. bond-buying stimulus boosted bullion's inflation-hedge appeal.

The metal broke above $1,600 an ounce, extending its rally to a fourth straight day, after Bernanke said Fed policymakers are cognizant of potential risks from its loose monetary policy, but the risks did not seem material now. 

Reuters: Goldman Sachs cuts 2013, 2014 gold price forecasts

LONDON, Feb 26 (Reuters) - Goldman Sachs cut its 2013 gold price forecast to $1,600 an ounce from $1,810 an ounce, saying the metal's recent price drop and an increase in U.S. real interest rates have led it to bring forward its projections for a decline in the metal.

If that projection proves accurate, it will mark the first year gold has recorded a lower average price year-on-year since 2001, when its record-breaking 12-year bull run began.

Business Insider: UBS: A 'Major Gold Rally' Is Coming In Q3

According to UBS commodity strategist Julien Garran, the gold market is approaching "High Noon."

That's the moment closer to the middle of 2013 when investors are going to have to make a decision on what they think the Federal Reserve is going to do with regard to quantitative easing in the second half of the year.

Garran writes in a new report on commodities that at that point, "the outlook for the rest of the year depends critically on whether the Fed 'blinks first' and stops QE, or whether the global economy 'blinks' and we see a slowdown in global growth momentum into 3Q13 while QE3 is continuing."

Kitco: No Way Fed Will Stop Easing: Jim Rickards

View the video >>>

Bloomberg: Gold’s Cycle Seen Turned by Goldman Sachs as ETP Holdings Drop

The cycle for gold prices, which climbed for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal.

The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800. Goldman reversed an assumption exchange-traded products holdings will expand in 2013, analysts Damien Courvalin and Jeffrey Currie wrote in a Feb. 25 report.

Zero Hedge: Gold And Silver Inverse Slamdown

It would appear that someone tripped and flipped the algo switch this morning as the ubiquitous morning slamdown has morphed into a take-off. Perhaps it is no coincidence that every Muppet's favorite banker (cough Goldman Sachs cough) opined on Gold's coming weakness yesterday [5] and that hedge funds are the least exposed to the precious metals on record, which as everyone BUT Goldman knows, is the traditional signal that it is a time to buy. Actually we take that back: Goldman certainly knew it, which is why it has been urgently advising its clients to sell... To Goldman.

Forbes: Fed Actions Big Boost For Gold

When investing in gold, I often say diverse opinions promote critical thinking and a healthy market. I believe elevated groups of buyers and sellers create a competitive tug-of-war in the bid and ask price of the precious metal.

Last week, we saw the gold bears growling louder and gaining strength, as the world’s largest gold-backed ETF, the SPDR Gold Trust, experienced its largest one-day outflows since August 2011. The fear trade fled the sector following the release of minutes from the FOMC’s January meeting that revealed a growing dissension among some of its members over the central bank’s bond-buying program.

GoldSeek: Are Correlations Between Currencies and Precious Metals Returning to Normalcy?

We have been witnessing the abnormal situation in the intermarket correlations for quite some time now, i.e. positive correlation between dollar and gold and silver (or virtually no correlation at all) , and negative one between the general stock market and precious metals sector. Such a set-up is not the best from the precious metals perspective, as the overall medium-term outlook is bullish for stocks and bearish for dollar. But last week seems to have brought some important changes to the structure of correlations. Before we analyze them, let’s see what happened on the currency market last week – we’ll focus on the USD Index (charts courtesy by http://stockcharts.com.)

King World News: Why Gold Is Going To $20,000 & Silver Into The Stratosphere

With gold and silver surging strongly on Bernanke’s Congressional testimony, today acclaimed money manager Stephen Leeb explained to King World News why gold is headed to $20,000 and silver into the stratosphere.  Here is what Leeb had to say:  “There is no question that Bernanke pulled the rug out from under the gold bears today.  Their argument has been that the Fed is starting to turn a little bit more hawkish.  We had some propaganda coming out which indicated the Fed was going to end QE at some point this year.”

CNBC: Traders Bet Silver Will Shine

Silver has been weak for a long time, but yesterday the bulls were jumping in.

The option paper hit in the ProShares Ultra Silver fund, which is double-leveraged to the price of the metal. More than 2,300 March 42 calls traded in a heavy buying pattern for $0.95 and $1 in volume well above the strike's previous open interest of 678 contracts, indicating new activity, according to OptionMonster's tracking systems.

Calls lock in the price where investors can buy the fund, so they can generate some nice leverage in the event of a rally. But if the stock stays below the $42 strike price, their entire investment could evaporate in a matter of just three weeks.

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